SPY 10-Minute Chart: In spite of yesterday's enthusiastic close, the market started the day down . . . and stayed there. In the background there is the dock strike and the missile attack on Israel, but mainly it is October and a top is due.
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MARKET/INDUSTRY GROUP/SECTOR INDEXES
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THE MARKET (S&P 500)
IT Trend Model: BUY as of 8/14/2024
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Yesterday's bullish engulfing candlestick did not play out with a rally as it should have. Instead price dropped and is about to test horizontal support and the 20-day EMA. The big news is that the PMO topped today.
The VIX dropped below its moving average on the inverted scale and Stochastics topped displaying some new weakness coming in.
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S&P 500 New 52-Week Highs/Lows: New Highs actually increased on today's decline. This has caused the High-Low Differential to pause its decline. Still we have lower tops on New Highs versus the higher tops on price so a negative divergence is in play. We also see a negative divergence on the High-Low Differential.
Climax* Analysis: There was one climax reading today, not enough to call a climax day.
*A climax is a one-day event when market action generates very high readings in, primarily, breadth and volume indicators. We also include the VIX, watching for it to penetrate outside the Bollinger Band envelope. The vertical dotted lines mark climax days -- red for downside climaxes, and green for upside. Climaxes are at their core exhaustion events; however, at price pivots they may be initiating a change of trend.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The Swenlin Trading Oscillators (STOs) both fell today and we have noticed negative divergences on both of them. We also have a negative divergence on %PMOs Rising. As we would expect participation did bleed off today.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM topped today on the decline. This confirms the falling short-term indicators. There is a negative divergence on the ITBM and %PMO Xover BUY Signals.
PARTICIPATION CHART (S&P 500): The following chart objectively shows the depth and trend of participation for the SPX in two time frames.
- Intermediate-Term - the Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA). The opposite of the Silver Cross is a "Dark Cross" -- those stocks are, at the very least, in a correction.
- Long-Term - the Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA). The opposite of a Golden Cross is the "Death Cross" -- those stocks are in a bear market.
The market bias is BULLISH in both the intermediate- and long-term timeframes.
We lost some ground on %Stocks > 20/50/200EMAs. The Silver Cross Index topped today. Because it remains above its signal line, the IT Bias is BULLISH. The Golden Cross Index reversed higher today, but with participation of stocks above their 200-day EMA reading at about the same level, it isn't likely to rise much further. It is above its signal line so the LT Bias is BULLISH.
BIAS Assessment: The following table expresses the current BIAS of various price indexes based upon the relationship of the Silver Cross Index to its 10-day EMA (intermediate-term), and of the Golden Cross Index to its 20-day EMA (long-term). When the Index is above the EMA it is bullish, and it is bearish when the Index is below the EMA. The BIAS does not imply that any particular action should be taken. It is information to be used in the decision process.
The items with highlighted borders indicate that the BIAS changed today.
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CONCLUSION: The market landscape changed quite a bit today with most of our indicators topping including the all important PMO. We have also detected quite a few negative divergences throughout our charts in each timeframe. As we said earlier, it is October and seasonally speaking it isn't usually a good month for the indexes in general. It is time to digest those all-time highs and it appears we are about to. Keep your stops in play.
Erin is 60% long, 0% short.
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CALENDAR
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BITCOIN
After the nice breakout above the August top, price has really fallen apart on Bitcoin. We were looking for it to challenge prior highs, but now it is likely to test lows again. The longer-term declining trendline wasn't tested before its decline which is bearish. The indicators look terrible with the RSI now entering negative territory below net neutral (50) and Stochastics diving lower. The PMO is headed for a Crossover SELL Signal.
BITCOIN ETFs
INTEREST RATES
Yields ticked lower today, but still show bottoming formations. We are looking for them to start rising again, but we see it as diminishing weakness not new strength so we don't think they'll rise too much further.
The Yield Curve Chart from StockCharts.com shows us the inversions taking place. The red line should move higher from left to right. Inversions are occurring where it moves downward.
10-YEAR T-BOND YIELD
$TNX dropped below support but did form a hammer candlestick that implies we will see it rise tomorrow. It doesn't look incredibly strong right now. It is still in a declining trend essentially. We think it will see a bit more upside, but not looking for it to rise much further. The PMO is just too far below the zero line right now.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT managed a rally today but formed a bearish filled black candlestick so the rally could be shortlived. The PMO is still in decline, but Stochastics and the RSI look more bullish. Resistance has been met and we would expect it to struggle here.
This is a good spot for a reversal as price is sitting in a support zone on the 50-day EMA, the PMO just isn't supporting a big reversal here.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar rallied to overhead resistance. The PMO just put some margin between it and its signal line and the RSI moved into positive territory for the first time in some time. This is a strong resistance level but we wouldn't be surprised if we see a breakout here given rising Stochastics. Stay tuned.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold managed a rally even as the Dollar rallied today. This is bullish for Gold which could be setting up a bull flag formation. We aren't ready to get too bullish here as the PMO is topping and Stochastics are falling. We are on the lookout for a decline.
GOLD MINERS (GDX): Gold Miners reversed on Gold's rally but we think this will be short-lived. The market itself is looking weak and Gold is vulnerable as the Dollar looks slightly more bullish. This rally did repair %Stocks > 20EMA but we wouldn't count on this rally just yet given diving Stochastics.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/1/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Crude Oil had a big rally day bringing Energy much higher. This is likely due to tensions building in the Middle East right now. How long this can fuel Crude Oil higher is unknown. We do note that the PMO is beginning to rise again and the RSI moved back into positive territory. Stochastics also turned up so we should see a bit more rally.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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NOTE: The signal status reported herein is based upon mechanical trading model signals, specifically, the DecisionPoint Trend Model. They define the implied bias of the price index based upon moving average relationships, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
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